WASHINGTON - In the Navy's latest bid to batten down costs in the troubled littoral combat ship program, top officials announced Wednesday that they have scrapped plans to split a three-ship buy in fiscal 2010 between two teams, one of which includes Austal USA's shipyard in Mobile.
In its place, they plan a complicated two-stage buying strategy that raises the stakes for for all concerned.

Next spring, the Navy intends to award a winner-take-all fixed price contract for up to 10 ships by 2014 to one of the two teams, one led by General Dynamics Corp. (which is working with Austal) and the other, Maryland-based Lockheed Martin Corp.

Then in fiscal 2012, Navy leaders will open the field to new competitors - possibly among them Northrop Grumman Corp's huge shipyard in Pascagoula - to buy another five ships built to the same winning design.

"This change to increase competition is required so we can build the LCS at an affordable price," Navy Secretary Ray Mabus, a former Mississippi governor, said in a prepared statement. "LCS is vital to our Navy's future. It must succeed."

For Austal, which employs some 950 people at its Mobile County operations, the latest shakeup could either assure it a steady stream of contracts for the next five years or end its role in the program after it finishes up the two LCS orders it has already won.

Bill Pfister, Austal's vice president for external affairs, referred all questions Wednesday evening to Virginia-based General Dynamics, where a spokesman had no comment.
Sen. Richard Shelby, R-Tuscaloosa, the senior member of Alabama's congressional delegation, said in a statement that he was "disappointed" by the restructuring. When the Navy makes its choice next year, he said, "I am hopeful the General Dynamics/Austal team will be chosen. ..."

As the vessel's name suggests, the Navy wants the LCS for missions in the "littorals," as coastal waters are called in military jargon. Relatively small and fast, the ship is intended for submarine-hunting, anti-mine operations and other activities. Over time, the Navy wants to add a total of 55 to the fleet.

Although the ship was supposed to be comparatively cheap, both teams have struggled with overruns running into hundreds of millions of dollars. Earlier this year, Navy leaders insisted they were making progress in bringing expenses under control.

But after receiving bids last month for the 2010 ships, officials found "no reasonable basis" to conclude that the program could proceed under the existing purchasing approach "given the reality of budget constraints," Navy acquisition chief Sean Stackley told reporters at a news conference late Wednesday afternoon.

By having one shipyard built 10 ships, he said, "production efficiencies should drive costs down."

But the Navy's decision to let a new player into the LCS program in 2012 seemingly meshes with Mississippi Rep. Gene Taylor's call for more competition beyond the Lockheed and General Dynamics teams.

Taylor, a Bay St. Louis Democrat whose district includes the Pascagoula shipyard, has said he only wants the best deal for taxpayers.

Asked whether Taylor, a top member of the House Armed Services Committee, influenced this latest decision, Stackley answered that the Navy has been working closely with all four congressional defense panels "as we outline our way ahead."
(Press-Register Political Editor George Talbot contributed to this report.)